Friday, June 1, 2012

Markers sharply lower on weak jobs growth in May

Dow sank another 212 to its lowest level in 2012, decliners over advancers 6-1 & NAZ dropped 58.  The Financial Index fell 5+ to the 182s, its lowest level since early Jan. 

The MLP index fell an enormous 8+ to the 355s (one of its biggest daily losses in history) & the REIT index dropped 5 to the 243s.  Junk bond funds were lower while Treasuries soared , bringing new record low yields. Oil fell to the lowest level in almost 8 months as worsening employment rates in the US & the euro area signaled lower fuel demand.  The price of gold, which was trading at about $1550 before the report, shot up $30 as investors saw gold as a safe place for their money.

JPMorgan Chase Capital XVI (AMJ)

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CLN12.NYM....Crude Oil Jul 12...84.21 .....Down 2.32  (2.7%)

GCM12.CMX...Gold Jun 12....1,599.30 ...Up 36.70  (2.4%)

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U.S. Employers Add 69,000 Jobs, Fewer Than Forecast

Photo:   Bloomberg

The US economy suddenly looks a lot weaker.  Employers created only 69K jobs in May, the fewest in a year, & the unemployment rate ticked up, fanning fears that the economy is sputtering.  The Labor Dept also said that the economy created far fewer jobs in the previous 2 months than first reported.  It revised those figures down to show 49K fewer jobs created.  The unemployment rate rose to 8.2% from 8.1% in Apr, the first increase in 11 months.  The economy is averaging just 73K new jobs a month over the past 2 months, roughly a third of 226K jobs created per month in Q1.  Slower growth in the US comes at a perilous time for the global economy.  As expected, markets did not take this news well.  Hopes springs eternal that the Federal Reserve will start another bond buying program, but with interest rates at record lows, how much good can that do?

Chrysler, Nissan U.S. Sales Rise Less Than Estimated Last Month

Photo:   Bloomberg

Major auto companies reported US sales gains in May that trailed estimates even as they boosted incentive offers to draw buyers amid slow job growth.  General Motors (GM) deliveries last month rose 11% to 245K. Toyota’s (TM) sales surged 87% to 202K, Chrysler’s climbed 30% to 150K & Nissan’s increased 21% to 91K.  But results missed estimates for gains of 15% at GM, 93% by TM, 40% by Chrysler & 29% by Nissan.  Industrywide light-vehicle sales may have trailed the 14.4M annualized rate that was estimated.  Employers in the US added the fewest workers in a year & the unemployment rate ticked up to 8.2%.  Ford (F), which reported a 13% sales gain that beat estimates, boosted incentives in May, Chrysler offered some buyers no monthly payments for 90 days & GM offered discounts to try to offset market-share recovery by Japanese automakers.  Ford deliveries last month rose to 215K & beat the 12% gain estimated.  Chrysler, ranked 4th in US, began production in May of the Dodge Dart compact & starts shipping the car to dealers this month.  Deliveries of the Caliber, which Dart replaces, fell 66%.  TM, #3 in US, still may have led the industry with its gain.  Honda deliveries probably rose 53%.  It entered May having reported year-over-year sales declines in 10 of the last 12 months.  Total light-vehicle deliveries in May are predicted to surge 31% to 1.39M, keeping the US on pace for its best annual total since 2007.  Auto companies are leading the recovery in the US recovery (whatever it is).

Ford, Chrysler, Nissan U.S. Sales Climb in May

  • <p>               A miner throws a firecracker at the Industry Ministry during a demonstration to protest against cuts in Madrid, Thursday, May 31, 2012. Miners coming from all around Spain demonstrate in Madrid amid fear on losing their jobs. Spain is moving closer to the financial tipping-point that could force it to ask for a bailout as the country's borrowing costs neared unsustainable levels Wednesday. The country's economic fortunes have gone from boom to bust over the past decade.(AP Photo/Daniel Ochoa de Olza)
Photo:   Yahoo

Spain's finance minister claimed the country was fiscally stable now that its autonomous regions were meeting deficit reduction targets.  But investors remained wary & pushed bond yields higher. The eurozone countries are expected to meet a target to get their collective deficits below 1.5% this year.  They ran a deficit of 0.45% of GDP in Q1, & with the help of €5B from the central gov, ran a balanced budget.  OK!  But most of Spain's excessive deficits in 2011, at 8.9%, were almost 3 times the EU limit of 3%, came from the regions' overspending.  8 of the regions, including powerful Catalonia in the northeast, saw their credit ratings downgraded this week by the Fitch agency.  The ones that issues debt are paying high rates.  The gov is close to completing a mechanism that will allow the regions to issue debt through the central gov at lower rates.  Worries about Spain's deficits as well as its banking sector have pushed the gov borrowing rates toward unsustainable levels, presently 6.56%.  The rate was more than 5.4% higher than the equivalent German one, which is considered a safe haven for investors.  Despite the rise in cost, Spain believes it can meet its debt obligations. "Spain has the ability to make good on that debt in its entirety." Sure!  Spanish Economy Minister Luis de Guindos this week that Spain & Europe were at a crossroads as speculation mounts over whether the country will need a bailout.  The danger is that Spain's €1T ($1.24T) economy is far bigger than those of already bailed-out Greece, Ireland & Portugal combined.  No encouraging words today from Spain.

Spain tries to calm investors amid market pressure AP

The news arrived & it was bad on all scores.  The US recovery is stumbling & it's supposed to be leading the world.  Leading the world now, means leading a retreat.  More magic from the Federal Reserve, even if it comes, probably will not do much good.  Markets are heading lower until they can find  footing. 

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